1990 (10) TMI 108 - AT - Income Tax

Higher Rate, Manufacturing Concern, Mistake Apparent From Record, Original Assessment, Plant And Machinery, Rate Of Depreciation, Special Rate

Summary

Issues Involved:
1. Rectification of depreciation rates under Section 154 of the Income-tax Act.
2. Interpretation of relevant entries in the depreciation table.
3. Computation of relief under Section 80J.
4. Computation of interest under Section 215 of the Income-tax Act.

Detailed Analysis:

1. Rectification of Depreciation Rates under Section 154 of the Income-tax Act:
The assessee company, a glass manufacturing concern, claimed depreciation at higher rates for its plant and machinery from 1977-78 onwards. The Income-tax Officer (IAC) found that depreciation had been claimed incorrectly at 20% for all plant and machinery, whereas only specific items were eligible for this rate. The IAC initiated proceedings under Section 154 for the assessment years 1979-80 to 1982-83 to rectify this mistake. The assessee company agreed to the rectification but reserved the right to appeal. The IAC reduced the allowable depreciation to 10% for items not falling under the specific categories entitled to higher rates.

2. Interpretation of Relevant Entries in the Depreciation Table:
The relevant entries in the depreciation table were:
- General rate for machinery and plant: 10%
- Glass manufacturing concerns with recuperative and regenerative glass melting furnaces: 20%
- Moulds used in glass manufacturing: 30%
- Direct fire glass melting furnaces: 100%

The IAC concluded that only items under the specific categories mentioned (recuperative and regenerative furnaces) were entitled to the 20% rate, while other items should be depreciated at the general rate of 10%. The CIT(A) initially canceled the rectification orders, stating that the mistake was not apparent from the record and required prolonged arguments. However, upon appeal, it was held that the mistake was indeed apparent from the record and did not require extensive reasoning. The rectification was justified as no two views were possible on the interpretation of the relevant entries.

3. Computation of Relief under Section 80J:
The assessee argued that the CIT(A) should have directed a fresh computation of relief under Section 80J due to the change in the written down value of the plant and machinery following the rectification order. The Tribunal restored the matter to the CIT(A) for reconsideration, emphasizing the need to recompute the relief under Section 80J in light of the revised depreciation values.

4. Computation of Interest under Section 215 of the Income-tax Act:
Similar to the relief under Section 80J, the assessee contended that the CIT(A) should have addressed the recomputation of interest under Section 215, which was affected by the rectification order. The Tribunal directed the CIT(A) to consider this ground as well, ensuring that the interest computation aligns with the corrected depreciation values.

Conclusion:
The Tribunal allowed the departmental appeals, reinstating the IAC's rectification orders. The cross objections filed by the assessee were allowed for statistical purposes, with directions to the CIT(A) to reconsider the grounds related to the recomputation of relief under Section 80J and interest under Section 215. The Tribunal emphasized the need for accurate interpretation and application of depreciation rates as per the specified entries in the depreciation table, confirming that the mistake was apparent from the record and rectifiable under Section 154.